Pharmacies owner decides to exit

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Australian Unity generates revenue of $28 million a year from its pharmacies.Picture:Michael Clayton-Jones

Victoria's retail pharmacy industry, mired in confusion over proposed legislative changes, is in for another shake-up after Australian Unity said it would sell its 13 pharmacy stores.

The sale comes just weeks after Prime Minister John Howard intervened in planned changes to the state's pharmacy laws by suggesting the Bracks Government should limit friendly societies to owning no more than six pharmacies.

Friendly societies in Victoria currently can own as many pharmacies as they want, but Mr Howard's proposed changes would ban them from further expansion and cap new entrants.

The legislation has been put on ice while the State Government considers if it might defy the Prime Minister's suggestion.

At the same time, retailers Woolworths and Coles Myer are demanding to be allowed to open pharmacy outlets inside their supermarkets. Neither is considered a potential buyer of Australian Unity's stores.

Australian Unity chief executive Ian Ferres said the pharmacy sale was not triggered by the proposed legislative changes, and instead arose after a 12-month review of group strategy.

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He said the pharmacy unit needed more funds and more outlets to grow profits, but Australian Unity wanted to expand other areas of its business, particularly funds management, property management, financial planning, general insurance and retirement and nursing homes.

"Australian Unity is growing and expanding, and its profit this year is probably going to be 40-50 per cent higher than last year, depending on end-of-year adjustments," Mr Ferres said.

The organisation had held a strategic review to determine needs and the best use of capital. It decided that, having begun to get its pharmacies "back on a profitable track", it would need to buy more stores, refit existing ones and move some stores.

Mr Ferres said his organisation was "staggered" at what he said was a campaign by the Pharmacy Guild to cap friendly societies, and said the societies should be allowed to expand their pharmacy businesses.

"To be comparing the friendly societies in Victoria to the big, bad Coles or Woolies (Woolworths) is just a myth," he said.

Australian Unity generates revenue of $28 million a year from pharmacy and is the third-biggest pharmacy chain in Victoria. The biggest is My Chemist, a chain of 44 stores owned by a group of pharmacists trading through the demutualised East Yarra Friendly Society.

National Pharmacies, a friendly society based in South Australia, owns 19 stores and is considered a likely buyer of some Australian Unity stores. Chief executive Jim Howard declined to comment yesterday.

Mr Ferres said several Australian Unity pharmacists had indicated they might be interested in buying one or two outlets.

The industry is highly fragmented because individual pharmacists are banned from owning more than three outlets.

A major review of the sector in 2000 recommended lifting all ownership caps. But the Prime Minister this month told the Bracks Government that if it retained some caps it would still receive millions of dollars for which the state was eligible under National Competition Council directives.